MCQOPTIONS
Saved Bookmarks
MCQOPTIONS
This section includes 35 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
X inefficiency occurs when ? |
| A. | The price is greater than the marginal cost |
| B. | The price is greater than the average cost |
| C. | Costs are higher than they could be due to a lack of competitive pressure |
| D. | There are external cost |
| Answer» D. There are external cost | |
| 2. |
Which of the following statements about price and marginal cost in competitive and monopolized markets is true ? |
| A. | In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost. |
| B. | In competitive markets price equals marginal cost, in monopolized markets price equals marginal cost |
| C. | In competitive markets price exceeds marginal cost, in monopolized markets price exceeds marginal cost |
| D. | In competitive markets price exceeds marginal cost in monopolized markets price equals marginal cost |
| Answer» B. In competitive markets price equals marginal cost, in monopolized markets price equals marginal cost | |
| 3. |
Which of the following is not a barrier to entry in a monopolized market ? |
| A. | A single firm is very large |
| B. | The government gives a single firm the exclusive right to produce some good |
| C. | The costs of production make a single producer more efficient than a large number of productions |
| D. | A key resource is owned by a single firm |
| Answer» B. The government gives a single firm the exclusive right to produce some good | |
| 4. |
Which of the following is necessary for a natural monopoly ? |
| A. | economies of scale |
| B. | a high proportion of the total cost in the cost of capital goods |
| C. | the market is very small |
| D. | all of the above |
| Answer» E. | |
| 5. |
Which of the following is a characteristic of pure monopoly ? |
| A. | One seller of the product |
| B. | low barriers to entry |
| C. | close substitute products |
| D. | perfect information |
| Answer» B. low barriers to entry | |
| 6. |
Which of the following best defines price discrimination ? |
| A. | charging different prices on the basis of race |
| B. | charging different prices for goods with different costs of production |
| C. | charging different prices based on cost-of-service differences |
| D. | selling a certain product of given quality and cost per unit at different prices to different buyers |
| Answer» E. | |
| 7. |
Which of the follow statements about price discrimination is not true ? |
| A. | Perfect price discrimination generates a deadweight loss |
| B. | Price discrimination can raise economic welfare. |
| C. | price discrimination requires that seller be able to separate buyers according to their willingness to pay. |
| D. | Price discrimination increases a monopolist’s profits. |
| E. | For a monopolist to engage in price discrimination buyers must be unable to engage in arbitrage. |
| Answer» B. Price discrimination can raise economic welfare. | |
| 8. |
When a monopolist produces an additional unit, the marginal revenue generated by that unit must be ? |
| A. | below the price because the price effect outweighs the output effect |
| B. | above the price because the output effect outweighs the price effect |
| C. | above the price because the price effect outweighs the output effect |
| D. | below the price because the output effect outweighs the price effect |
| Answer» B. above the price because the output effect outweighs the price effect | |
| 9. |
Using government regulations to force a natural monopoly to charge a price equal to his marginal cost will ? |
| A. | Cause the monopolist to exit the market |
| B. | improve efficieny |
| C. | raise the price of good |
| D. | attract additional firms to enter the market |
| Answer» B. improve efficieny | |
| 10. |
Thomas is a monopolist in the production of your textbook because ? |
| A. | Thomson has a legally protected exclusive right to produce this textbook |
| B. | Thomson owns a key resource in the production of textbooks. |
| C. | Thomson is a natural monopoly, |
| D. | Thomson is a very large company |
| Answer» B. Thomson owns a key resource in the production of textbooks. | |
| 11. |
This monopolist should produce ? |
| A. | 1 |
| B. | 2 |
| C. | 3 |
| D. | 4 |
| E. | 5 |
| Answer» D. 4 | |
| 12. |
The purpose of antitrust (also known as competition) laws is to ? |
| A. | Increase competition in an industry by preventing mergers and breaking up large firms. |
| B. | regulate the prices charged by a monopoly |
| C. | increase merger activity to help generate synergies that reduce costs and raise efficiency. |
| D. | create public ownership of natural monopolies |
| E. | all of these answers |
| Answer» B. regulate the prices charged by a monopoly | |
| 13. |
The monopolist’s supply curve ? |
| A. | does not exist |
| B. | is the marginal cost curve above average variable cost? |
| C. | is the marginal cost curve above average total cost |
| D. | is the upward-sloping portion of the average total cost curve |
| E. | The upward-sloping portion of the average variable cost |
| Answer» B. is the marginal cost curve above average variable cost? | |
| 14. |
The marginal revenue curve in monopoly ? |
| A. | Equals the demand curve |
| B. | Is parallel with the demand curve |
| C. | Lies below and converges with the demand curve |
| D. | Lies below and diverges from the demand curve |
| Answer» E. | |
| 15. |
The inefficiency associated with monopoly is due to ? |
| A. | underproduction of the good |
| B. | the monopoly’s profits |
| C. | the monopoly’s losses |
| D. | overproduction of the good |
| Answer» B. the monopoly’s profits | |
| 16. |
Public ownership of natural monopolies ? |
| A. | tends to be inefficient. |
| B. | usually lowers the cost of production dramatically. |
| C. | creates synergies between the newly acquired firm and other government-owned companies. |
| D. | does none of the things described in these answers |
| Answer» B. usually lowers the cost of production dramatically. | |
| 17. |
In the UK the government ? |
| A. | Bans monopolies |
| B. | Fines all monopolies |
| C. | Prevents firms acquiring more than 25% of the market |
| D. | Has the right to investigate monopolies and will assess each one on its own merits |
| Answer» E. | |
| 18. |
In pure monopoly, what is the relation between the price and the marginal revenue ? |
| A. | the price is greater than the marginal revenue |
| B. | the price is less than the marginal revenue |
| C. | there is no relation |
| D. | they are equal |
| Answer» B. the price is less than the marginal revenue | |
| 19. |
In price discrimination, which section of the market is charged the higher price ? |
| A. | The section with the richest people |
| B. | The section with the oldest people |
| C. | The section with the most inelastic demand |
| D. | The section with the most elastic demand |
| Answer» D. The section with the most elastic demand | |
| 20. |
In order to practice price discrimination which of the following is needed ? |
| A. | some degree of monopoly power |
| B. | an ability to separate the market |
| C. | an ability to prevent reselling |
| D. | all of the above |
| Answer» E. | |
| 21. |
In order to maximize profits, a monopoly company will produce that quantity at which the ? |
| A. | marginal revenue equals average total cost |
| B. | Price equals marginal revenue |
| C. | marginal revenue equals marginal cost |
| D. | total revenue equals total cost |
| Answer» D. total revenue equals total cost | |
| 22. |
In monopoly which of the following is true ? |
| A. | There are many buyers and sellers |
| B. | There is one main buyer |
| C. | There is one main seller |
| D. | The actions of one firm do not affect the market price and quantity |
| Answer» D. The actions of one firm do not affect the market price and quantity | |
| 23. |
In monopoly when abnormal profits are made ? |
| A. | The price set is greater than the marginal cost |
| B. | The price is less than the average cost |
| C. | The average revenue equals the marginal cost |
| D. | Revenue equals total cost |
| Answer» B. The price is less than the average cost | |
| 24. |
In monopoly in long run equilibrium ? |
| A. | The firm is Productively efficient |
| B. | The firm is allocatively inefficient |
| C. | The firm produces where marginal cost is less than marginal revenue |
| D. | The firm produces at the socially optimal level |
| Answer» C. The firm produces where marginal cost is less than marginal revenue | |
| 25. |
In a monopoly which of the following is not true ? |
| A. | Products are differentiated |
| B. | There is freedom of entry and exit into the industry in the long run |
| C. | The firm is a price taker |
| D. | There is one main sellers |
| Answer» C. The firm is a price taker | |
| 26. |
If regulators break up a natural monopoly into many smaller firms, the cost of production ? |
| A. | will rise |
| B. | will fall |
| C. | will remain the same |
| D. | could either rise or fall depending on the elasticity of the monopolist’s supply curve |
| Answer» B. will fall | |
| 27. |
If a marginal revenue exceeds marginal cost, a monopolists should? |
| A. | increase should |
| B. | decrease output |
| C. | keep output the same because profits are maximized when marginal revenue exceeds marginal cost |
| D. | raise the price |
| Answer» B. decrease output | |
| 28. |
Compared to the case of perfect competition, a monopolist is more likely to ? |
| A. | charge a higher price |
| B. | produce a lower quantity of the product |
| C. | make a greater amount of economic profit |
| D. | all of the above |
| Answer» E. | |
| 29. |
Compared to a perfectly competitive market a monopoly market will usually generate ? |
| A. | higher prices and lower output |
| B. | higher prices and higher output |
| C. | lower prices and lower output |
| D. | lower prices and higher output |
| Answer» B. higher prices and higher output | |
| 30. |
Barriers to entry do not include ? |
| A. | Patents |
| B. | Internal economies of scale |
| C. | Mobility of resources |
| D. | High investment costs |
| Answer» D. High investment costs | |
| 31. |
According to Schumpeter ? |
| A. | Monopolies are inefficient |
| B. | Monopoly profits ac as an incentive for innovation |
| C. | Monopolies are alocatively efficient |
| D. | Monopolies are productively efficient |
| Answer» C. Monopolies are alocatively efficient | |
| 32. |
A welfare loss occurs in monopoly where ? |
| A. | The price is greater than the marginal cost |
| B. | The price is greater than the marginal benefit |
| C. | The price is greater than the average revenue |
| D. | The price is greater than the marginal revenue |
| Answer» B. The price is greater than the marginal benefit | |
| 33. |
A monopoly is able to continue to generate economic profits in the long run because ? |
| A. | there is some barrier to entry to that market |
| B. | Potential competitors sometimes don’t notice the the profits |
| C. | the monopolist is financially powerful. |
| D. | antitrust laws eliminate competitors for a specified number of years. |
| E. | of all of the things described in these answers |
| Answer» B. Potential competitors sometimes don’t notice the the profits | |
| 34. |
A monopolist maximizes profit by producing the quantity at which ? |
| A. | marginal revenue equals marginal cost |
| B. | marginal revenue equals price |
| C. | marginal cost equals price |
| D. | marginal cost equals demand |
| E. | none of these answers |
| Answer» B. marginal revenue equals price | |
| 35. |
A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a ? |
| A. | natural monopoly |
| B. | perfect competitor |
| C. | government monopoly |
| D. | regulated monopoly |
| Answer» B. perfect competitor | |